Mogul
John Malone is a
larger-than-life figure who played a leading role in bringing the cable
industry into being. In telling his life story Malone gives us a history of the
cable television industry from its humble beginnings to its peak in the late
20th century to its slow decline in the face of competition from streaming. He
was also involved in a host of media deals starting in the 1980’s with CNN and
right up to the potential of a Warner Brothers Discovery deal with Paramount
Skydance.
The title of the book
is derived from the Steppenwolf song “Born to be Wild.” We forget that CATV
stands for Community Antenna Television. The industry began in the late 1960’s
when a few hardy entrepreneurs began putting up towers in rural areas to capture
the signals from over the air television. From the towers they strung wires to
customers who previously were unable to watch television. Many of the founders
actually strung the wires themselves. The industry exploded in the late 1970’s
as satellites beamed down programming such as TBS and HBO to the cable
operators. And in the 2000’s we witnessed
the full flowering high speed broadband connections into our homes.
Into this milieu
stepped John Malone, a middle-class kid from Connecticut with a degree from
Yale and a Ph.D. in operations research from Johns Hopkins. He started out at
Bell Labs and in his 20’s he addressed the full AT&T board on how to
improve its capital structure. After his suggestions were
not adopted by the Bell-Heads, he transitioned to a consulting role and
subsequently joined Jerold Electronics, a company that manufactures cable
hardware. After being passed over for the CEO job at
Jerold’s parent company he struck a deal with Bob Magnes, who was building out
his cable operation out of Denver. Malone became the CEO of Tele-
Communications in 1973, and by 1996 it was the largest cable operator in
country.
Although I was never
a player in the industry, I was peripherally involved in the industry through a
few small investments. In the 1970’s made seven times my money on Scientific
Atlanta, a major supplier of cable boxes. Along the way I owned stock in Cox
Communications and Malone’s Liberty Media, and I suffer for my sins by still
owning shares in Comcast.
When I was working
with Salomon Brothers in the 1990’s Bell Atlantic proposed taking over
Tele-Communications. Salomon was representing Bell Atlantic in the deal. I
remarked to Jack Grubman, Salomon’s star telecommunications analyst, that
there is no way the cable cowboys in Denver would culturally mesh with the Bell
Atlantic suits in Philadelphia. That deal did not happen, but when AT&T
later bought Tele- Communications the cultural issues that I worried about came
to the fore.
Malone presents
portraits of such media moguls as Rupert Murdoch, Sumner Redstone, Ted Turner,
Brian Roberts, Barry Diller, and David Zaslav. Afterall he was instrumental in
the success of Turner’s CNN and funded Robert Johnson’s efforts to form BET
(Black Entertainment Television) Though his Liberty Media, Malone had control of Charter Communications,
SiriusXM, Formula 1, Direct TV, Home
Shopping Network, The Discovery Channel, Match.com, international cable assets,
and the Atlanta Braves. Although he has stepped back from active management, he
remains a force to be reckoned with in the media world.
A good part of
Malone’s success was due to his playing the tax code like a Stradivarius. Wherever
he could he avoided the payment of taxes and the prime vehicle for that was to
create letter stock in his affiliated companies. Although too complicated to go
into here, letter stock enables the parent company to segregate the economics
of a subsidiary to a new set of shareholders.
Not without good
reason, Malone was vilified by the public and politicians as a monopolist who
delivered poor service at high prices. Some of this was true because
Tele-Communications under-invested in service and capital equipment, Hence the
need to merge with a big Telco. As Malone recognizes the cable industry gold
standard is Cox Communications (now Enterprises), which has the best customer
service with the most advanced equipment. I was very unhappy when the company
was taken private in 2004. Cox is now in the process of merging with Charter
Communications to become the largest cable provider in the U.S.
There is much more to
Malone’s autobiography, and highly recommend this book for those interested
understanding how our telecommunications cornucopia came into being.
